Congress is heading for a new showdown with the White House after Republicans took the rare step of voting to declare the attorney-general Eric Holder in contempt over a botched smuggling operation aimed at Mexican drug cartels.

The Republican-controlled House oversight committee, which has been investigating the sting operation along the Mexican border, voted 23 to 17 on Wednesday in favour of a recommendation to start proceedings against Holder for alleged contempt of Congress.

The full House is scheduled to vote next week and, with a Republican majority, is almost certain to back the committee's contempt recommendation.

The oversight committee vote came hours after Obama deployed his executive privilege power for the first time since taking office in suppport of Holder.

The Republicans claim Holder misled Congress when he initially denied knowledge of the operation and that he failed to act on a subpoena to hand over documents related to the case.

The scene is set for another protracted showdown between the White House and Congress. Since the Republicans won control of the House in November 2010, there has been almost continuous warfare between them and Obama, mainly over debt.

The Republicans are portraying this new clash as an Obama administration cover-up. The Democrats are accusing the Republicans of political theatrics.

Obama used his executive power to deny the House committee access to documents it had demanded in relation to the arms smuggling fiasco.

If the whole House, as expected, votes in favour of contempt, the case would then move to a DC court, where the issue would be likely to become bogged down for months, with a judge asked to adjudicate between executive and legislative power. In the end, the judge would be unlikely to attempt to overturn Obama's executive privilege power.

But the row would at least give the Republicans in Congress an issue with which to beat up Obama in the months running up to the White House election.

The case centres on the drugs operation known as Fast and Furious, in which US agents turned a blind eye to arms being smuggled across the Mexican border. The agents had set up the sting operation in the hope they could trace the smuggled guns to high-ranking traffickers linked to drugs cartels.

But agents from the bureau of alcohol, tobacco, firearms and explosives in Arizona, lostcene track of more than 1,000 weapons. Two of the weapons turned up at the sof the killing of US border patrol agent Brian Terry in December 2010.

The Republican case is that Holder misled Congress last year when he said he was unaware of Fast and Furious, but documents released later showed he had been briefed on it.

The justice department tried to explain the discrepancy by claiming Holder had misunderstood the original question.

The latest row came to a head when the House oversight committee chairman, Republican Darrell Issa, who has been pressing hard on the case for more than a year, had issued a subpoena demanding the justice department hand over a further batch of documents relating to the case.

But, just minutes before the committee gathered to discuss the vote, Obama asserted executive privilege to withhold the documents.

Issa called the move an "untimely" assertion of the privilege, which has been asserted just 25 times since 1980.

George Bush's administration used executive privilege half-a-dozen times, including to protect then vice-president Dick Cheney and senior adviser Karl Rove, and was heavily criticised by the Democrats for doing so. Democrats accused the Bush administration of abusing the executive privilege power.

The Obama administration had until now resisted following suit.

Buck Brendan, a spokesman for Republican House speaker John Boehner, suggested that the Obama decision moved the row from just involving Holder to enveloping the White House.

"Until now, everyone believed that the decisions regarding Fast and Furious were confined to the department of justice. The White House decision to invoke executive privilege implies that White House officials were either involved in the Fast and Furious operation, or the cover-up that followed," Brendan said.

"The administration has always insisted that wasn't the case. Were they lying, or are they now bending the law to hide the truth?"

The Obama administration view is that it has already released to the House committee all the documents directly related to Fast and Furious and that the subpoena is a fishing expedition, applying not to the operation but the response of Holder and other officials to it.

Holder met Issa on Tuesday and offered to hand over the requested documents in return for an assurance that this would end the dispute. Issa rejected the offer, prompting Holder to accuse Issa of political gamesmanship.

Elijah Cummings, the most senior Democrat on the committee, accused his Republican colleagues on Wednesday of not wanting a solution, saying the justice department had already provided thousands of documents.

A lawyer, speaking on behalf of the parents of the dead US border patrol agent, Josephine Terry and Kent Terry, also criticised Obama.

"Attorney-general Eric Holder's refusal to fully disclose the documents associated with Operation Fast and Furious and President Obama's assertion of executive privilege serves to compound this tragedy. It denies the Terry family and the American people the truth," the lawyer said.

The Terrys said that their son "was killed by members of a Mexican drug cartel armed with weapons from this failed justice department gun trafficking investigation. For more than 18 months we have been asking our federal government for justice and accountability. The documents sought by the House oversight committee and associated with Operation Fast and Furious should be produced and turned over to the committee. Our son lost his life protecting this nation, and it is very disappointing that we are now faced with an administration that seems more concerned with protecting themselves rather than revealing the truth behind Operation Fast and Furious."

Rush Limbaugh, the conservative talk-show host, lambasted the president on his radio programme. "Obama has never explained the details of what occurred to anybody – not the media, not investigators, not Congress. He is the head of the executive branch, so he asserts executive privilege. Meanwhile, he pretends that he knew nothing, but he's trying to protect himself," Limbaugh said.

He added: "This administration seems to be so incompetent, I don't know how good they are at managing a cover-up … even when they got the news media working on their side."